continued Seven tips for the first-time homebuyer
Don’t be unduly influenced by media reports that banks are not making loans. Banks are in the business of lending, and they want to help you.
Here are some things you can do to help ensure that you can take advantage of the optimal market conditions to find and finance your fabulous first house:
- Take a good look at your budget. Are you in good financial shape? If you do not currently have a budget, create one. At minimum you should review two to three months of income and expenses to see what type of mortgage payment your budget can accommodate.
- Consider your long-term plans. To make buying a home worth your while, Kiplinger.com advises staying in a home five to seven years. Always remember that your home is your shelter. The housing bubble of the last decade was unprecedented, and it is likely that we are returning to a more realistic market where house values only increase marginally year-over-year.
- Take a good look at your income. Remember, home ownership requires more than just a monthly mortgage payment. Will your income support home maintenance, upkeep and the occasional emergency? Don’t forget to account for taxes.
- Review your FICO score. This is what lenders will look at first to determine your rate. If your number is not as high as you would like, see what you can do to strengthen your credit before applying. You can view your credit report for free at annualcreditreport.com.
- Know your down payment capacity and don’t overlook closing costs? Ideally, you should have a down payment of 20 percent. This will save you from paying primary mortgage insurance, or PMI, and may help you get a better interest rate. But remember, low down payment options are available to creditworthy buyers. Closing costs are the fees you will need to pay to your lender, title company, local taxing authority and insurance companies to finalize the transaction.
- Research your market. On a national level, experts are forecasting that the housing market will stabilize. However, markets are shaped by local influences. Talk with realtors and lenders about trends and forecasts for your area. It will help you understand the market you are buying in, and it will help you predict what the value of your home will do in the foreseeable future.
- Assemble a great team. Buying a house can be a complicated and emotional process. A team consisting of experienced professionals—real estate agent, mortgage broker, insurance agent and attorney—can help you avoid many first-time homebuyer mistakes.
- Remember, purchasing a house is more than a long-term investment. While it certainly can generate a great yield if you buy smart and maintain or improve its value over time, it is first and foremost “home”—the place where you will build a lifetime of memories. And for those who have saved and are ready to make the move to buy their first house, there may never be a better time than now to make owning your own home a reality.